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Why Care about NFTs?
NFTs are making intangible assets safer to own & easier to trade. This is profound because Intangible assets are worth trillions, and make up 80% of the S&P500’s value.
This note explains how NFTs are unlocking major opportunities for global businesses, users & investors – outside of the crypto hype.
How Do NFTs Disrupt Digital Assets?
NFTs reduce middlemen with code.
Imagine a normal middleman – you’re buying a used car – so you need to do 2 things:
- Verify the asset: Find a seller & check the track record of the car (service history)
- Trade the asset: how quick, safe & cost-effective is the trade?
Your car dealership (the middleman) takes care of this in a few days for a 15% fee. You trust the car will be reliable based on the dealership’s reputation.
NFTs can be a 10x improvement. How?
NFTs enable both trading & verification (of an asset) to be:
- Safer: remove most traditional types of negligence & fraud with code
- Faster & Lower-Cost: avoid bureaucracy, because less middlemen are needed
- Instantly-Global: don’t get limited by centralized bureaucracies (law, admin, government)
In this article we summarise 28 mainstream use-cases, to illustrate the disruptive power of NFTs, using practical examples.
Infographic: Best NFT Use-Cases
Let’s dive straight in:
NFT Use Case 1: Illiquid Assets
Such as: Private Equity & Infrastructure Funds.
Current problems:
- Investors are locked in, they can’t sell in the first 7-10 years
- Illiquidity excludes many investors, so less money is raised
Why are NFTs a 10x improvement:
- Give liquidity by allowing the assets to trade globally 24/7
- Opens the assets to new & more investors
NFT Use Case 2: Private Assets
Such as: Venture capital, private equity or private capital
Current problem:
- Investors are excluded because of high minimum investment & laws, such as Accredited Investors
Why are NFTs a 10x improvement:
- Allows small investors to access these investments
- Note some brokers already offer fractionalization but NFTs are cheaper & don’t have middleman risk
NFT Use Case 3: In-Game assets
Such as: Skins, Avatars, Loot (that gives Access or Progress)
Current problem:
- Gamers spend hours & billions of dollars but don’t own their purchases, share in game revenue or have input into game design.
- Secondary assets (tournaments, track records, fan items) are siloed in each game.
- Game developers battle to acquire users & get funding, which leads them to work for studios (which misaligns developers and gamers)
Why are NFTs a 10x improvement:
- Gamers own their assets (benefitting financially), share in game revenue & give input into game design.
- Secondary assets are interoperable across games, increasing their usefulness & value.
- Gamer’s developers can monetize in many new ways & be rewarded for quality games in alignment with users getting better games.
NFT Use Case 4: Vouchers & Tickets
Such as: shows & events (sports matches & live concerts)
Current problem:
- Tickets aren’t always transferable (if you can’t make an event, you lose your money)
- Where tickets are transferable: price gouging & other negative-value activities occur
Why are NFTs a 10x improvement:
- Tickets can be traded 24/7 on open markets, allowing accurate pricing, maximizing event attendance and protection for buyers (if they can’t make an event).
- Ticket organizers can program ticket rules to prevent price gouging & other negative behaviours.
NFT Use Case 5: Rewards & Loyalty Programs
Current problem:
- Customers are locked into each program (rewards can only be used at tied shops)
- Customers have to do tedious activities to earn rewards for different programs.
Why are NFTs a 10x improvement:
- NFTs allow an open marketplace for rewards to trade. Network effects creates exponential value. Customers aren’t locked into one program.
- Customers are rewarded for their normal buying behaviour, without having to meet tedious criteria. This allows rewards to capture a much larger share of wallet.
NFT Use Case 6: Business IP
Such as Trademarks & Patents
Current problem:
- Intangible assets can’t be accurately valued. Patents & Trademarks have no explicit value.
- IP lawyers charge extortionary fees to management IP trades – this excludes many inventors from participating.
Why are NFTs a 10x improvement:
- Incentivises inventors to innovate (because they can price their innovation asset)
- Inventors are fairly rewarded because they can safely sell their innovation on secondary markets without expensive lawyer fees.
NFT Use Case 7: Intangible IP
Such as: Brand equity & Accounting goodwill
Current problem:
- Brand & Goodwill are large assets across companies, yet their value is estimated. Business transactions (e.g. M&A) can’t create fair deals without accurate pricing.
Why are NFTs a 10x improvement:
- NFTs global 24/7 trade allowing pricing of these assets based on the two principles of ‘willing buyer’ & ‘wisdom of the crowd’.
- NFTS enable efficient trading of these assets. Businesses can be fairly compensated for creating intangible assets.
NFT Use Case 8: Value Swaps
Such as: Carbon Credits
Current problem:
- Carbon credits are powerful but require intermediaries that are inefficient (slow & expensive to verify & trade)
- Carbon markets are exclusive and many people globally don’t have access to trade
Why are NFTs a 10x improvement:
- NFTs allow efficient verification & trade (lower cost, 24/7, faster)
- NFTs give global access to carbon markets so that more people can participate (anyone with an internet connection can access the market).
NFT Use Case 9: Digital Art
Current problem:
- Physical art is expensive to store, transfer & protect. This excludes many people from participating.
- Physical art doesn’t always benefit the artist on secondary marketplaces.
- Physical art is hard to verify (to prevent fraud) requires an expensive art expert.
Why are NFTs a 10x improvement:
- NFTs allow digital art to be protected, transported & traded at low-cost, quickly & safely.
- NFTs enable programmability that can benefit artists on secondary sales markets e.g. artists can earn ongoing royalties.
- NFTs avoid fraud by accurately verifying pieces.
NFT Use Case 10: Fan Memorabilia
Current problem:
- Many Fan collections are hidden from the open market (in someone’s home).
- Collections are hard to value and trade.
Why are NFTs a 10x improvement:
- NFTs allow fan collections to be openly visible to global markets.
- Liquid global markets allows collections to get accurate pricing as well as safe & cheap trading (even when you don’t know the counterparty).
NFT Use Case 11: Community
Current problem:
- Digital communities are the new status symbol (the digital-equivalent of buying a Rolex), but how can you prove someone is part of a group?
Why are NFTs a 10x improvement:
- NFTs allow people to prove & display their membership (imagine you could instantly check if your friends Rolex was real).
- NFTs allow distribution of exclusive benefits e.g. event tickets can be safely sent to members, where only a member can unlock the tickets.
NFT Use Case 12: Content Rights & Royalties
Current problem:
- Artists & creators pay large amounts of their income to middlemen (like record labels & agents)
- Artists are tied to suffocating contracts with middlemen, because the middlemen gave them initial funding.
Why are NFTs a 10x improvement:
- NFTs allow fans to fund up-and-coming artists
- NFTs reduce middlemen. This gives artists a bigger share of the revenue they create.
- NFTs allow fans to directly access artists, building a stronger relationship and allowing more ways for artists to monetize.
NFT Use Case 13: Early-Stage Crowdfunding
Current problem:
- Creators & entrepreneurs give up large percentages of their business to investors or platforms (like Kickstarter) who help them find funding.
Why are NFTs a 10x improvement:
- NFTs give entrepreneurs a direct relationship to a global market of potential investors. This gives the business more exposure and a higher chance of funding.
- The process of funding is cheaper & safer than middlemen platforms.
- Investor rewards can be programmed into the NFT. This improves the amount of funding because investors are certain they will get a reward if the business succeeds.
NFT Use Case 14: Voting Records
Current problem:
- Double voting & voter apathy are two major issues (not just in politics but in any organization)
Why are NFTs a 10x improvement:
- NFTs reduce middlemen, making an easy & safe way to get avoid fraudulent voting and get accurate statistics after an election.
- This is critical for many 3rd world nations, where people’s lives have been destroyed by bad voting.
NFT Use Case 15: Medical Records
Current problem:
- You’re in a coma, doctors in the emergency room don’t know anything about your medical history.
Why are NFTs a 10x improvement:
- Accurate medical records instantly available to assist medical staff in treating you.
NFT Use Case 16: Legal Rights
Such as Ownership
Current problem:
- Title deeds are slow & expensive to search, register & transfer.
Why are NFTs a 10x improvement:
- NFTs replace the cost of law firms & the bureaucracy of government departments.
- Legal documents are easily-accessible, transferring rights is quick & low-cost.
NFT Use Case 17: Academic Records
Current problem:
- You’re hiring new staff. Proving their expertise (experience & academic skills) is a cumbersome & unreliable process (you need to trust a reference they chose).
Why are NFTs a 10x improvement:
- Instantly verify the expertise of anyone you do business with.
NFT Use Case 18: History
Current problem:
- History is written by the victors.
Why are NFTs a 10x improvement:
- History is written by everyone, so all perspectives are recorded.
NFT Use Case 19: Identity & Passport
Current problem:
- ID requires dealing with government departments (slow & costly)
- Carrying physical documents / ID cards is risky and inefficient
Why are NFTs a 10x improvement:
- Digital ID can be securely verified
- Using your verified ID online allows instant approval
- Renewing ID documents can be done easily & cheaply online
NFT Use Case 20: Website Domains & Brand Names
Current problem:
- Domain transfers require a centralized broker that is slow & expensive (try transferring through GoDaddy)
- Brokers only offer their own domains so users must go through multiple brokers if domains are with different brokers
Why are NFTs a 10x improvement:
- Instant, safe, low-cost domain transfer (far better than manual brokers)
- All Domains are openly available across marketplaces, because marketplace access protocol where all domains exist
NFT Use Case 21: Social Accounts
Current problem:
- Social asset are not owned by users and so they can’t be valued or traded
Why are NFTs a 10x improvement:
- NFTs allow users to own their social accounts, allowing them to be valued & traded.
- NFTs safely verify social accounts allowing buyers to check social assets & trade safely.
NFT Use Case 22: Credit Card Security
Current problem:
- Credit cards scams are a huge and growing category of identity theft. Billions of dollars are lost each year to these scams.
Why are NFTs a 10x improvement:
- NFTs significantly reduce fraud because your credit card payments are linked to your ID which can be verified instantly.
- NFTs reduce any admin burden around dealing with your bank (e.g. card renewal)
NFT Use Case 23: Verify Signatures
Current problem:
- Fraud commonly requires faking signatures to gain illegal access. Signatures are a weak barrier (a missed opportunity to prevent fraud).
Why are NFTs a 10x improvement:
- NFTs can instantly verify your digital signature is associated with your digital ID. This reduces fraud where a criminal’s online reputation is permanently damaged and can be checked by future people they deal with.
NFT Use Case 24: Authenticate Assets
Current problem:
- Buying fake goods costs billions in lost revenue each year. Many people don’t know they have a fake item until years later (when its harder to catch the criminal).
Why are NFTs a 10x improvement:
- NFTs can track the history of a product e.g. track ownership of a piece of art (improving the chance of tracking down fraudsters)
- NFTs can instantly verify the authenticity of a product by matching a product ID to an artist’s ID of the product. Where duplicates arise, the product is instantly flagged as having a fake.
NFT Use Case 25: Check Brand Claims
Current problem:
- Consumers have no way of checking that brand claims are accurate.
Why are NFTs a 10x improvement:
- NFTs track the origin & production of a product e.g., if a brand claims 100% natural & organic, the consumer can check the exact factory/farm it came from.
- Farms/factories with false claims permanently destroy their reputation i.e. clear incentives for brands and farms to live up to their claims.
NFT Use Case 26: Supply Chain Tracking
Current problem:
- When products fail, business spend time & money working out where the issue happened, in their supply chain.
Why are NFTs a 10x improvement:
- NFTs allow companies to instantly match a finished-product, to every supplier involved in the production of its parts.
- Businesses save time (sales don’t have to be paused for long) & only need to remove bad products (as opposed to removing all products util the bad ones are found).
NFT Use Case 27: Qualifications & Experience
Current problem:
- You’re looking for a professional (dentist/architect/mechanic), but you don’t know if they have the right expertise, qualification & experience for your specific need.
Why are NFTs a 10x improvement:
- NFTs can instantly verify expertise, qualification & experience. This reduces your risk and helps you make good choices.
NFT Use Case 28: Permission: Licenses & Access
Current problem:
- Organizations & Events require extensive permissions for different people. Managing this is cumbersome and easily abused.
Why are NFTs a 10x improvement:
- NFTs can instantly verify permission of any person for any type of access they request.
Final Alpha on NFTs:
NFTs can be used for
- Existing digital assets: such as the multibillion-dollar gaming industry & ecommerce
- New assets (that previously couldn’t be priced): such as IP, trademarks & brand equity – these new assets are new business opportunities.
Finally, as the world becomes digital, so NFTs will be more useful (and valuable).
